Speaking before big-shot investors on Wall Street last week, assistant Treasury secretary Anthony Ryan said the marketplace needs to be protected against financial predators.

"While predation is the law of the jungle in nature, as civilized society, we need to have laws in place to protect investors and consumers," Ryan told the Securities Industry and Financial Markets Association (SIFMA).

"Market integrity is critical for a sound and robust market," he continued. "Market participants must know the playing field is level and the rules are fair. There is a real benefit to the existence and enforcement of broad anti-fraud and anti-manipulation authorities. Predatory lenders, rumor mongers, market manipulators, insider traders and others who seek to gain an unfair advantage must be identified and prosecuted."

This is great stuff and you can readily agree with Ryan's sentiments, but no predatory lender will ever be persecuted by the federal government. The reason? Predatory lending is not a federal crime.

Don't believe it? Just take a look at the annual statistics for financial crimes. Not a single case of predatory lending.

In our system mortgage fraud -- such as deliberately and materially inflating income or assets on a loan application -- is a crime. But if a borrower qualifies for an FHA mortgage at 6 percent and is sold a subprime loan at 8 percent, the law says that's not a crime and that's not predatory lending. That's just good business for a lender -- though perhaps not so good for the borrower who now has far higher monthly costs and is much more likely to lose his home to foreclosure and bankruptcy and thus lower the value of neighborhood houses.

Our Treasury official says "it is important that regulators have broad authority to investigate and prosecute these actions. These measures instill confidence in market participants that the market is operating in a fair and transparent fashion where rules matter."

Mr. Ryan is right, of course, but he would be more right if the concepts of fairness and transparency applied not just to borrowers but also to lenders. Until predatory lending is a federal crime with actual consequences there's little reason for borrowers or investors to have faith in a one-sided system which does not serve them well.

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Published: May 7, 2008

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .